Guest Post: Consumers Flash Warning Signal

While bad news may be good news for the market hoping that it will spur more stimulative measures from the Fed to boost asset prices – for Main Street America bad news is just bad news. More importantly, the decline in consumer confidence continues to perpetuate the virtual economic spiral. As the consumer retrenches the decline in aggregate end demand puts businesses on the defensive who in turn reduces employment. The reduction in employment, and further stagnation of wages, puts the consumer further onto the defensive leading to more declines in demand. It is a difficult cycle to break.